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Joint and Several Liability For Antitrust Fines: Parent Company Can Benefit From a Reduction in Its Subsidiary’s Fine

In Depth

A judgment of the EU General Court in March 2011, upheld on appeal by the Court of Justice of the European Union (CJEU) on 22 January 2013, is potentially good news for parent companies. Where both a parent company and its subsidiary bring separate court challenges against a cartel fine for which they were held jointly and severally liable, the parent company should benefit from any reduction in fine that the court grants to the subsidiary, provided that the challenges brought by the two companies have the “same object”.

In light of these judgments, it would appear that a parent company’s argument should be similar to that adopted by its subsidiary when challenging a fine imposed jointly and severally on both of them. At the same time, the parent company may wish to contest the fact that it was held jointly and severally liable for the subsidiary’s infringement. This would require the parent to demonstrate that it did not exercise a “decisive influence” over the subsidiary’s commercial policy. Reconciling this latter argument with a challenge to the subsidiary’s fine is, however, likely to require skilful drafting of the parent company’s pleadings.

Two separate court challenges were brought by a parent and its subsidiary, contesting the fine for which the two companies were held jointly and severally liable. The two challenges concerned the fine imposed by the European Commission for the subsidiary’s participation in the copper and copper alloy fittings cartel.

In the first case (Case T-386/06, Pegler v Commission), the General Court reduced the fine imposed on Pegler, a subsidiary of Tomkins, by €1 million. In the parallel case brought by the parent (Case T-382/06, Tomkins v Commission), the General Court held that the reduction of the fine granted to the subsidiary applied to the parent, by virtue of the fact that the parent and its subsidiary constituted a single entity. The General Court reasoned that since the Commission imputed liability on the parent based on the single entity doctrine, it follows that the reduction of the fine for the subsidiary should also be extended to the parent company.

The Commission appealed to the CJEU against the General Court’s judgment in Tomkins on several grounds. In particular, the Commission argued that the General Court ruled ultra petita (above and beyond what had been asked of it), because the challenge brought by the parent company, Tomkins, did not raise the elements decided upon by the General Court in Pegler. The CJEU held that “where the liability of the parent company is derived exclusively from that of its subsidiary and where the parent and its subsidiary have brought parallel actionshaving the same object, the General Court was entitled, without ruling ultra petita, to take account of [the earlier decision]” (Case C-286/11P, European Commission v Tomkins plc).

The CJEU also rejected the Commission’s argument that the two cases did not have the same object. It ruled that the notion of the “same object” does not require the scope of the applications by both companies to be identical. The CJEU did not elaborate, however, on the precise meaning of the expression “same object”.

When parent companies challenge cartel fines imposed jointly and severally on themselves and their subsidiary, they will have to draft their pleadings carefully to ensure that they can benefit from this “same object” principle.

Aiste Slezeviciute, a trainee solicitor in the Brussels office, also contributed to this article.